There is a need for the cash-to-GDP ratio of 12% to come down for demonetization to be successful, Chief Economic Advisor Arvind Subramanian said on Monday.
There is a need for the cash-to-GDP ratio of 12% to come down for demonetization to be successful, Chief Economic Advisor Arvind Subramanian said on Monday.
India, which has been a largely cash-driven economy thanks to the reluctance of the majority to make a shift to digital mode of payments and a large rural population which is still devoid of basic internet, mobile, and banking facilities, saw 86% of its currency (in value) removed from its system on November 8 when the government delegalised the use of Rs 500 and Rs 1000 notes.
In the aftermath, tight cash withdrawal limits were imposed on current and savings bank accounts and from ATMs to regulate the amount of cash that is released in the economy. New Rs 500 and Rs 2000 notes were issued at a slow pace to meet the demand but the move eventually forced many to take to digital transactions. On Monday, the RBI removed the last of the cash withdrawal caps from savings bank accounts, finally bringing the demonetization exercise to an end.
While nearly Rs 15 lakh crore in cash was sucked out of the system in the aftermath of demonetization, according to the latest RBI data, most of it has been released back into the system, remonetizing the economy.
While demonetization may have pushed up digital transactions, the dependency on cash seems to have gone down only in the vigil period.
Talking about the Universal Basic Income (UBI) proposed by Finance Minister Arun Jaitley, Subramanian also said "India can afford Universal Basic Income only if it phases out few of the existing welfare programs."
While speaking in Kochi on Monday, Subramanian also weighed on the impact of protectionist policies subscribed to by US President Donald Trump. He said, "Protectionist polices in the West can have big impact on Indian economy, exports will suffer hitting overall growth." Trump, who has vowed to bring back jobs and manufacturing to the US, his office is touting restrictions on H-1B to curb the inflow of low-cost labour into the country. Trump has also vowed to levy a 30-45% border tax on imports from other countries.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
 "CEA Arvind Subramanian")
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}